Oli Wong and Lilian Hsu
To promote innovation in insurance products and meet the diversified needs of consumers, the Financial Supervisory Commission of Taiwan (hereinafter, the “FSC”) announced the policy of the establishment of neo insurance companies in 2021 and announced that application for establishing neo insurance companies will be accepted from August 1 to October 31, 2022.
To implement the aforementioned policy, four regulations related to the establishment and operation of neo insurance companies were amended, namely, the Regulations for Establishment and Administration of Insurance Enterprises (hereinafter, the “Establishment Regulations”), the Regulations Governing Business Solicitation, Policy Underwriting and Claim Adjusting of Insurance Enterprises (hereinafter, the “Solicitation Regulations”), the Regulations Governing Pre-sale Procedures for Insurance Products, and the Regulations Governing Non-Life Insurance Enterprises Engaging in Injury Insurance and Health Insurance, which were promulgated on June 29, 2022. The regulations related to the establishment application, business solicitation, and internal controlling systems and procedures of neo insurance companies are highlighted below:
I. Scope of business:
A neo insurance company is an insurance company that sells insurance products to customers solely through the Internet or other forms of electronic transmission. A neo property insurance companies may only sell innovative insurance products, while a neo life insurance companies may only sell protection-type insurance products (Article 29-1 of the Establishment Regulations).
II. Minimum paid-in capital:
A neo property insurance company primarily operates innovative products with mostly one-year or short-term insurance contracts with funds utilized mainly in short periods and with a minimum paid-in capital set at NT$1 billion. A neo life insurance company mainly operates protection products, taking into account factors such as the tariff structure, benefit amount, uncertainties, etc., and using funds mostly in the short to medium term, with the minimum paid-in capital set at NT$2 billion (Article 29-3 of the Establishment Regulations).
III. Application qualifications and documentation:
1. Promoter’s qualifications: a promoter group should include both a financial promoter and a professional financial technology promoter(Article 29-4 of the Establishment Regulations).
Financial promoters: the total share subscription by financial institutions, as promoters and shareholders, should reach at least 40% of the paid-in capital, and at least one insurance company or financial holding company with an insurance subsidiary should subscribe to shares accounting for over 25% of the paid-in capital.
Professional financial technology promoters: they should have experience in big data analysis (such as AI, machine learning, etc.), interface design, software development, Internet of Things, wireless communications, and other business and be able to propose a successful business model.
2. Application documentation:
The application for establishing a neo insurance company should be made by preparing documents such as the application for establishment permit, business plan, list of promoters, and supporting documents, etc., pursuant to law (Article 6 of the Establishment Regulations). In particular, the business plan shall, in light of its characteristics, include the customer identity verification mechanism, information system and security control and backup operations, business continuity plan, business model and insurance product planning, and market exit plan pursuant to law (Article 29-6 of the Establishment Regulations).
IV. Operating locations: except for the head office and customer service center, a neo insurance company shall not set up other physical business locations (Article 29-1 and Article 29-7 of the Establishment Regulations).
V. Establishment of business solicitation and internal handling systems and procedures (Article 16-1 of the Solicitation Regulations):
1. Since a neo insurance company uses the Internet and other related means to sell insurance products, it is not allowed to have insurance solicitors or sell insurance products through insurance brokers or insurance agents.
2. Since a neo insurance company directly sells insurance products, there is no need to solicit business through insurance solicitors. However, a neo insurance company is still required by law to establish internal systems and procedures for handling business solicitations, which should include and specify, at a minimum, the following matters: adequate understanding of matters concerning the applicant and the insured, the policy on the suitability of insurance products, matters not allowed in the solicitation of business, sales methods for selling various types of insurance products with surrender value to old-age customers, matters concerning inquiries from old-age customers seeking to understand insurance products with a policy value reserve, and other compliance matters that shall be followed as required by the competent authority.
 See the newsletter titled The Policy Objectives and Planning Direction of the Deregulation on the Establishment of Neo Insurers on the website of the Financial Supervisory Commission of Taiwan; released on December 21, 2021.